Paying the high price of progress

By Ross Cameron

December 2, 2010 — 12.00am

A year ago I was introduced at a blue chip institute, owned by Sydney University, to an eminent professor leading an exciting research project. His team had (almost) isolated the scent molecule in cat fur that is recognised by and affects the behaviour of rodents. He can demonstrate that exposing rats to the critical molecule, in tiny concentrations, causes them to flee from the source, with great reluctance to return, and brief exposure appears to interrupt their prolific breeding cycle. Almost one-third of the Indonesian rice crop is lost to rats and mice each year. For a country trying to feed 240 million people, most of whom eat rice every day, this is a seriously interesting idea.

The professor needed $300,000 to fund three senior scientists and their equipment and materials for a year to take the final step in isolating the active molecule from a dozen alternatives. I offered to raise the money privately but he explained this was not possible, as any private investment had to be sanctioned and brokered by the university's commercialisation arm, Sydnovate. I was informed that his funding rounds take place at fixed intervals – miss one and you have to wait for the next – and that grants of $50,000 are hard to get. It was possible for a private investor to help but there were very strict rules. The last time his team had gone down this path, it took two years to consider the request and a competing university in Europe published the innovation in the interim.

aCredit:Edd Aragon

The Commonwealth gave Sydney University $750 million in grants in 2009 – before you get to HECS payments and student fees. About $200 million a year goes to the faculty of medicine for research. Those funds employ a small army of very clever men and women in trying to solve human health-related problems. Sydnovate's sole purpose is to commercialise the good ideas that this army of researchers (and their colleagues in the faculties of engineering, chemistry, etc) create. So what is the royalty return that we taxpayers get for $750 million a year? It's $2.5 million in 2009 out of total university revenue of $1.4 billion – or one-third of 1 per cent. After 160 years of operation, Sydney University makes more money selling beer and hamburgers to students than it does licensing intellectual property.

Sydnovate employs 26 full-time staff including six lawyers and five PhDs. Like one hand clapping, they are expert at registering patents, hopeless at making money – all protection, no profit. They remind me of the Soviet shoe factory that suffered a failure of the left sole cutter and continued producing thousands of right shoes, knowing their quota in a command economy was measured by the number of shoes produced, rather than the number of pairs. There are partnerships, where industry has come to the university asking for help in a research task, but as far as I can tell, negligible revenue from faculty-created knowledge. Performance reporting is opaque; Sydnovate doesn't produce an annual report. If public company directors practised these levels of transparency with other people's money, they would be struck off.

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It's unfair to pick on one institution when the story is repeated so consistently. The University of Queensland gets points for effort in its Uniseed collaboration with Melbourne University and UNSW, which has attracted $15 million in third-party superannuation investment.

That ray of hope is overshadowed by the most recent DEEWR data (2008) suggesting "royalties, trademarks and licences" generate 0.46 per cent of total university operating revenue. By contrast, one US listed therapeutics company, AmGen, has amassed $50 billion in 30 years, improving the prospects of 18 million patients, by commercialising three good ideas.

The cost of running a research-intensive university is rising twice as fast as government willingness to fund it. The most creative idea to fill the hole seems to be more full-fee-paying foreign students. We go through the motions of running commercialisation units but there is little conviction and fewer results – partly because the culture of the education unions is so anti-profit and anti-business. How can our universities credibly teach "entrepreneurship" when their own record on the subject is so bad?

There will always be a place for "pure" research but we must move beyond the infantilism of institutions addicted to the easy money of government grants and foreign students.

The relevant leading body of public institutions – Knowledge Commercialisation Australia (KCA) – appears to see its role as rationalising the failure of its members and organising further and deeper raids on commonwealth and state treasuries.

KCA's message is that Australian universities ought to expect to make much less than 1 per cent of revenue from commercialising ideas because "discoveries that produce financial bonanzas are so rare that policies designed to pursue them would almost always lead to failure".

How inspiring. Recurrent funding to public research institutes should include incentives and penalties. If they prove incapable of giving cartilage to ideas, we should contract the role to others. Researchers must be able to bypass the politburos masquerading as deal-brokers. We could create an annual "Australian Innovation Market", bringing together venture capitalists and the research community, allowing scientists to produce a simple prospectus and pitch deals to recruit capital in a global online IP auction.

Failure to act also involves risk. The rats will keep eating the rice and our best minds will emigrate, fondly recalling Australia as a nice place to retire.